Summary
Lowest Housing starts for Decades. Increasing redundancies. Improving Rental Figures. Potential Housing crisis as shortages of homes grow.
Analysis
This news again demonstrates that the UK banking industry needs to get to grips with the mortgage market and rectify its own problems caused by its relaxation too far of the lending criteria. The lenders need to swing the lending pendulum back towards helping first time buyers back into the market place. This will then assist the beleaguered housing industry to sell stock units and restart building the housing that the UK requires. The first time buyers will then force the middle market to start moving again. Without new lending the banks will struggle to make ends meet particularly if the trend to higher savings rates continues. The housing developers all jumped on the apartment market wrongly following investor valuations and increased densities demanded by central government which in turn drove up values and reduced affordability. Lets be clear on one thing first time buyers do not want apartments they are desirous of a two bed starter home with driveway and garden which is likely in time to show some value uplift to enable them to trade up market. If the market falls further then the housing industry will take longer and longer to restart and housing demand will be stronger than ever before and this in turn will again drive away the first time buyer. This will further impact on the uk governments desire for 240000 new homes a year.The crisis in the housing market is going to be felt in the associated industries, lets be clear for every 1000 job losses in the housing companies there will be conservatively 5000 to 7500 allied construction trade losses and small companies going bust in an already small pool of skilled tradesmen, and this will have a serious impact on the ability of the house builders to respond to any market movement in the future, further exacerbating the supply/demand criteria. This will in turn affect individual mortgage repayments and will drive more repossessions in the mortgage market.There is already evidence of rental figures being teased up in the face of increased demand by as much 3 to 5% per year as more and more first time buyers cut out of the housing market not by high prices but an over cautious approach by the lending institutes to new business. Some one has to be brave here and be the first to start the ball rolling with the first time buyers. Who in the future is to build the rental properties? I doubt if any of the major house builder business models will lend itself to developing sites for rental only not outright sale. At the moment there appears to be only one route unless that UK lending institutions and the Government get involved straight away with decisive and well publicised action and that is a declining industry with continuing job losses and a housing shortage not seen since the second world war.
